In what was trailed as one of the “most important speeches” he’ll ever make, the chairman of Arts Council England (ACE), Sir Peter Bazalgette has warned arts venues that they must do more to make their audiences, output and workforce more diverse or face their grants being axed.

“There has to be a reckoning,” Bazalgette said. “The progress our funded organisations make with the diversity of their programmes, their audiences, their artists and their workforce will inform the decisions we take on their membership of the next national portfolio after 2018.”

He told the Guardian that he preferred to think of the announcement not as a threat, but as an encouragement: “I call it a carrot because it is a way of making it work better – I don’t call it a stick.”

Currently, 13 percent of the workforce within the ACE’s portfolio are from black and ethnic minority groups, close to the national average of 15 percent. Bazalgette accepted that statistic as a sign that “good progress” had been made, but wanted to see performing arts companies go further.

He said that too often in the past, championing diversity had been left up to a few niche companies who promote work by ethnic writers and performers, whereas he wanted to see diversity rolled out wholesale across the arts. And he wanted to see more non-whites elevated to management roles. Figures show that currently just under one in ten management roles are held by non-whites.

“Some National portfolio organisations and Major partner museums are making good progress – but diverse-focused organisations have been shouldering this responsibility alone for too long, so from now on, the responsibility for promoting diversity within the leadership, workforce, programming and audiences, must belong to all our funded arts organisations,” he said.

“For things to change, long term, they need to become more uncomfortable at the top. We have to open up access to power and to resources. Looking up, too many see the white cliff-face of the arts establishment and feel they just cannot climb it.

“We can’t give people creative talent.  But we can and must give those with talent creative opportunities. The arts are a mirror for society; and if we sort this, the arts won’t have to make the case for diversity.  The arts will simply be the case.’

The ACE currently awards grants to 670 theatres, dance troupes, orchestras and arts venues. From now on, it will publish data showing how ethnically diverse each company is. Each organisation will also have to submit plans showing how it intends to become more diverse, with future funding being awarded on the basis of how well the ACE believes it has fulfilled that criteria.

However, the ACE funds organisations across the length and breadth of England, including in areas where the ethnic population is markedly lower than the national average. For example, it funds five projects – two literary, a museum, and two mixed arts venues – in Norwich which is 90.8 percent white. Similarly, Plymouth’s population is 92.9 percent white British; ACE funds six projects there, including a theatre and a dance company.

In addition to this new drive towards diversity, the Arts Council already has a £6m Diversity Fund, and has just spent £25m of its strategic funding stream on the Creative People and Places Fund, designed to direct money into areas of low engagement.